Earnings call transcript Q2 2023

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Operator

Good afternoon, and welcome to the Floor & Decor Holdings Incorporated Second Quarter 2023 Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. At this time, I would like to hand the call to Wayne Hood, Vice President of Investor Relations. Thank you.

You may begin.

Wayne Hood

good and operator, you, afternoon, everyone. Thank Floor conference call. to & Decor's earnings quarter second XXXX fiscal Welcome

Joining our Langley, Officer; Trevor and me Chief Financial Lang, Taylor, on Chief President; call today and Bryan Officer. Executive President Tom Vice are Executive

Reform everyone the I language. to expectations, safe Act Private meaning during conference or of remind made and contain webcast refers Litigation the Any call subject company's statement future risks the of to Before we and future to forward-looking is of start, this a want harbor projections Comments uncertainties. or of statements Securities forward-looking and projections events, statement. XXXX are conditions financial characterizations other that including market within

any could materially in in not future listed note those a guarantee forward-looking & actual its market SEC results future company's performance filings. also Please is The such assumes that update differ any including past to reason, or results. no Floor statements. obligation those statements from for Decor expressed such of forward-looking information

at to be website website. will press ir.flooranddecor.com. found GAAP our materials A release, this this non-GAAP each between measures discuss by the most a We operating replay basis and our financial on call, on G. earnings financial related reconciliation Relations to A Regulation SEC measures directly non-GAAP as recorded be in Investor believe defined performance which During on company enable better the non-GAAP our comparable the comparable understand of core measure investors can these Investor periods. is call available of available Relations disclosures of will conference

Tom. over now me to Let the call turn

Tom Taylor

earnings call. our and fiscal Wayne, everyone, us you, for XXXX second on quarter conference Thank joining

quarter the XXXX highlights, performance for Trevor and of our second our call, about Bryan provide in-depth thoughts remainder share our review second discuss XXXX. of some will today's projections and will more a our During financial quarter of then I fiscal fiscal

diluted mortgage rising team's our amidst fiscal are on by we what of economic focus period. low during expectations. can existing home $X.XX, earnings challenging record control share how sales, our this the pleased which results challenges rates of start saying second and reflect intense we per me delivered quarter that financial near Let we These XXXX exceeded

We growth an at expectations. existing new elevated service and are investing our our sales in below customer effectively executing our strategies are and level, managing profitability when stores modestly in

to sales growth opening in to to been months headwinds declines year-over-year now warehouse rising plans in our have our from There sales the these of continues existing opening deliver XX quarter, growth. on create by in nine continue XXXth we term our consecutive mortgage Louisiana. rates, headwinds, including new store home Notwithstanding intermediate which second Metairie, stores

to strength are field flows the when contracting. allows we us is for proud a that at to inspiration Moreover, a continue New promotional newness England led balance open and organization. our We exciting our creates the in our stores drive of time opportunities and and growth our which industry existing that fortunate are sheet region, us invest cash

XX including turns, fiscal for updated an slab us will second by executed inspiration accessory and investments new stores exciting accelerated XX vignettes, When wood that XXXX, expect resets growth. industry center. of refreshes, believe position the market have end design quarter of decorative we center XXX we In will these demand all XXXX, XL the we share

prices the SKUs, rate at sequentially successfully strategically reduce retail while same execute gross specific plans to on time and margin growing our continue our year-over-year. We to

ever like as gaps price sequentially product during second are on and items, strong the widened they quarter. as Our

this XX% China demonstrated of percentage have FERC a our we our that product further and over drive XX% declined products time. to see approximately we risks of recently, Moreover, sourced geopolitical Through and innovation reduce path more economies newness, we from from we have diversification our China. enforcement our optimal to and scale product in XXXX, product ULPA been lower achieve cost, successfully can away our tariffs from reduce and agile sourcing strategies, efforts. sales from XXXX, meaningfully diversifying In

growth we Turning able are their to we pleased on commercial. with successes acquiring only the Not Surfaces, emerging June. Spartan at solutions for master by Sales organic build to but were in

be these in believe savings, home navigate as we a As are expect XXXX. we longer existing seeking well we value that and existing positioned increasingly market of out sales grow industry our forward, previously meet contemplated headwinds than and we even those look share home prioritize needs. to sales We the flooring more customers and retailers to duration weak challenging contracts best

me growth pillars. over and second our turn sales call Trevor the to discuss quarter now Let to

Trevor Lang

Thanks, Tom.

are incredibly stores challenging grow share our executing our this to with are strategies during We how market pleased period.

basket on reductions selling, price SKU line introductions, second product and open loyalty top select bulk new of focused conversion, are strategies, driving our We growth stores, compelling our in quote and top of particularly price the through sales XXXX displays at front half amongst engagement the pros. out

assortment We in-store and a prices quantities low of customer experience. online will broad emphasizing trend job our forward and quality continue lot products, top on everyday our in-stock

mix profitability are discretionary our spending. quarter most to align effective media organization, the improving time, by for transactions, and operational flexing and are same at We all-time across we the advertising pleased At protecting second highs. remain with payroll scores service spend our return the optimizing efficiencies our hours moderating

sales quarter X.X% Let comparable $X.XXX June. X% and increased Total and in billion XXXX our me in last X%, second below from May my fiscal X.X% X.X% which turn year, Comparable was sales modestly sales in to declined store April, to sales. comments store fell expectations.

sales perspective, quarter, weakest. remained like the From our the first a in Western regional and division

are provided XXXX down date, X.X%, updated store which quarter release. earnings sales comparable to reflected third our fiscal in in is press Our today's guidance

X.X% ticket decline quarter the a of I fiscal in from the modestly second last XXXX. declined below XXXX the store and but an decline our in which Comparable first year, transaction to from average fiscal quarter quarter Turning fourth expectations, X.X% transactions and performance. improvement was XX.X% our

quarter last The in fourth XXXX. is sequential ticket the from XX.X% X.X% average to second growth year ticket our of more anniversary average Our decision less sequentially are way well now of and prices meaningful customers increases and in in mainly in quarter square decelerating as footage quarter SKUs. that starting X.X% growth selectively purchasing lower a retail to decelerated as first due strategic the our specific we to on retail

are engaging in in projects and undertaking intentional smaller-scale projects very Overall, purchase fewer flooring decisions. their and homeowners pros are and

a are a rather than single room project project a project in For a X-room than example, they kitchen choosing or full rather bathroom bathroom project.

when rates to with tighter and in we less contributing projects financing interest factors has standards. programs last the compared are increase to fewer due subsidized Additionally, the cost square financing of lending Collectively, year. selling these risen us footage believe

landing prices. low the market we the the Indeed, we offer are That point believe and styles a flooring we year. the while stores products half share are even where in contracting. about continue we best when preferences at innovation the our consumers of industry project, Consequently, SKUs trends to our we better excited second ongoing and can is new price said, everyday see considering in an grow towards industry-leading customer our

openings, nine In warehouse discuss store I we towards nine quarter Louisiana. the opening goal one stores store the in day year. the opening fiscal new Among our new a XX store growth stores warehouse for last on XXXth will by three quarter. warehouse each early the May pillar warehouse story celebrated of of with our growth. Metairie, the We now in opened month opening opened of milestone the in compelling our in second of of completing format our format new XXXX, quarter

to stores, towards better the Each to the And I the the and U.S. stores store potential. made at we they are pipeline moment XXX want than have people previous a believe take new class. recognize all get year, excited in our to we I opening better of achieving I'm open this about that new possible.

We Buffalo, open and have new opening excited to fiscal stores plan plan record-setting the we Minnesota. nine markets new warehouse a new new New store York including including Rochester Moreover, and third quarter September. the a our month monthly XXXX, about plan quarter, Minneapolis, of in the stores Albany, opening four store for in of are XX third of in busy

in to Among and XXXX, the XX% we markets. intend XX-warehouse an XX% existing in be new fiscal will open format stores

consider a new we be where years our reminder, market. any a market have As stores to three than been less opened

beyond XXXX, cadence, and opening Looking delays expect to will which warehouse anticipate store ease construction more quarterly balanced we a store to operating weeks. lead more

Turning Pro to our business.

for Pros to from by second increased accounted comparable and Pro of driven X.X% declined in XXXX transactions. X.X% store quarter total decline XX% by a sales last sales. total year, fiscal Our sales

to continue pleased last in are While comparable spend last engagement compared store wallet metrics us where to from with growing we quarter top slightly year, Pros share. our Pros second declined with our more resulting a with sales year,

the of our from continue Premier Furthermore, last sales of we our that industry-leading value by XX% members, pleased Pro XX% points increased for PPR and demonstrating program. are Pro year. Rewards second our Over are strong loyalty PPR quarter from redeemed Pros a appreciation

and about grow allow to to CRM context customer will drive refinements in continue lead and dashboard We we further our which engagement. optimize Pro the enhance making our excited relationship us tools, are or and capabilities our are management

flooring with and sticky value solutions. also and about insulation build education We relationships design products, through training lifetime and Pros

second Pro destination education to XXXX, of industry by As we XXX call, XX workshops quarter we In be for discussed expanding educational aim in training partnerships. prior the Pros. earnings over premier our had the

to pro We from pros investments the last are We planned believe those with increased workshop working compared educational spending XX us for as their events year trained these XXXX. have significantly have XXX in year.

e-commerce our business. to Turning

our experience. second website. Our executing focus to XX e-commerce and digital clicks In on traffic our million to drove optimizing we team quarter, the continues drive strategies to customers'

XX% first Our and XX.X% fiscal accounted of the previous to the last for from year our quarter sales XX.X% e-commerce year compared second in sales increased and of XXXX XXXX. in quarter XX.X%

XX% and been Importantly, are stores have assets our customers physical working in to purchased who together. website. of they our say digital

merchandising be Importantly, continue focused new on categories. current and sales into about From user-generated perspective, online adding picked to XX% store. are in we a content expanding and up inspirational trends, our of

any Moving We customer. versus services design on services. working. of of any service design with our managing strategies We're from our are elevated project size believe an level to designers trained driving capable competition our

of us days now business. hours five have are designers for per coverage gives now all and we store, We -- which about

which equipped and software, more and a We consistent design better with have experience. designers to give allows us customers hardware

allows tools markets, better buying we to decision. results. are us in-home experience taking help produce in to design measurements test defining customer including with The in-home the samples, and pleased the the design allows now with the Our also visualization and make reviewing is us space, to work six customers style. This project

designers XXX working second from quarter our X,XXX plans last sales the over XXXX, We design the stores have the of with In in points have by our basis designers XXX end year. about to of increased year. now penetration

are Moving to Services that increased commercial quarter, reaffirming strategies flooring last commercial by another Spartan's total fiscal share Spartan business. XXXX our grow reported second sales from year. market on working. quarter XX.X% to strong further our

better pleased partially that gross continues Sales margin to transaction Spartan's by the from in margin rate EBITDA and costs We quarter. which offset expected, are was be Master than

with regional equally stores financial pleased are with work are in We results. Spartan's included managers, and that account not RAMs the that or our

Sales In the second flooring Solutions, another RAM Services distributor City XX% increased top commercial a in sales commercial acquired Spartan total Flooring step business New from market. our towards when York June, Our growing we year. last of took quarter Master

large and expands York in and leveraging significantly markets. the strong fragmented service. excited relationships about sundries network markets, and We're customer The great deepens logistics their large Sales and our England City contractor highly offerings, presence in delivery and New Master acquisition New core

the attributes expand in in these we believe will higher rates. we As win Northeast, result

to logistics, We expect to their purchasing Sales customers. levels value Master inventory benefit power, they better enhancing the increased from deliver and

commercial remain the we As our strategies. opportunity and market in calls, earnings discussed prior excited about

are we grow strength and continue operating a to XXXX Finally, beyond. the of excited our fiscal from position to and about market opportunity are in share

business have that the challenging and navigating strategies confident people, models continue successfully. this environment we are macroeconomic to right We

Bryan discuss our outlook share quarter to in I and fiscal to financial turn the of XXXX second the the detail more remainder will year. our now over for call results

Bryan Langley

share proud and Thank our dedication grow financial vendor Tom our associates Trevor. profitability results day. I'm their our particularly want for market to as XXXX and and I begin they customers quarter hard demonstrate work every how contraction. thanking second manage you, of period by a serving we partners our to of during fiscal our can industry all of and

growth We recapture executing gross plans are expenses. managing store new and in margin effectively our

in which million year. results led other despite positive successfully managed cash operating capital, working swing inventory to accomplished last Importantly, we same a period our flow $XXX the and We these from existing leading step during first lows. rates near that where to home sales of were back they quarter mortgage the record the from took end the at quarter, of XXXX a to rising

turn my our of will and among line of statement second discuss discussion the income flows. statement, Let the me outlook quarter the changes significant cash remainder our some items for to the I year. Then sheet balance of in

grow our We to plans our are successfully executing margin gross rate.

year-over-year. margin sequentially quarter and rate grew Second

Our margin quarter gross increased XX.X% fiscal exceeding XX.X% basis of XX.X% second points XXX rate our quarter improving in expectations year, XXXX. approximately from sequentially last the and to first from

mitigate costs. in increase rate is margin year due to we chain last gross year-over-year and retail primarily increases took product to The price higher supply

the experience chain income the this such, on reminder, we to year are average continue will weighted and late statement half working of are into XXXX. their and we as way a last through still benefit cost As of and reductions cost our to started method year the back supply accounting,

warehouse and expenses operating million, selling XX.X% increases XX occupancy related to higher to XXXX, credit card XX, quarter transaction higher store $XXX.X additional June to since stores processing costs in and operating increased attributable with rate wage is expectations. growth Second The fees. primarily our line

basis due of percentage costs comparable above approximately sales, to to in XX.X% The from expenses and other occupancy sales. year. the store As XXX points deleverage a points our selling our fixed XXX from operating and primarily last store expectations modestly was decline in increase increased basis

with center store operating from above transaction expenses expectations. modestly Master. including our Sales last and staff, general support our including investments due is acquisition of higher to expenses store year, XX.X% and technology related administrative to The support support growth our associated increased to increased investments approximately by $XXX,XXX related growth, quarter depreciation store costs to Spartan and Second other the subsidiary

comparable XX from million expenses expenses stores $XX.X As resulted a the Preopening XX.X% line our points to were in administrative the the primarily from an increased by deleveraged preparing expectations. year, from compared open last priority. increase percentage to with X.X% store of to to X.X% future decline basis sales, year our due general of last in in we The increase number and to primarily sales.

interest to facility outstanding under outstanding income Second quarter average to $X.X is from last increased rate increase The from primarily expense in by net partially increases rate year. contracts. interest interest cap million interest increase same offset in the million due period debt $X.X expense our million an on in ABL in and borrowings $X.X capitalized interest increases derivative interest our and

quarter expense Our XX.X% XX period points year, tax from the effective to same last The $XX.X million compared due the previous increased second tax limitations. to year. basis in by in income was to XXXM rate primarily $XX.X XX.X%

quarter in year. of approximately our impact second rate last XX.X% to tax the Excluding XX.X% compared excess benefits, same tax period was the

contracts. as were sales can quarter industry second below profitability we While growth our manage we expectations, modestly demonstrated effectively our that

million you EBITDA Second expectations. to $X.XX, press of earnings which our a quarter of can share exceeded reconciliation In complete grew and release, earnings today's GAAP adjusted X.X% per our to earnings. non-GAAP diluted find $XXX.X

sheet Moving flow. cash on to balance our and

us payable to our million inventory, along We reduce cash million of XXXX, an in are pleased from significant free period in in from under our to The the our from year positive increase working inventory as enabled increase us our and fiscal by enabled trade June million by decreased accounts billion decreased of to that ABL debt initiatives, XX.X% $XX.X flow. allowed a $XXX.X coupled decline improvement end last facility, other cash last borrowings by $X.X operating same the capital X.X% with XXXX. XX, with year. which cash in year-over-year to turn to and flow in swing The a $XXX.X reduce us in year-over-year report

Master. million acquisition for even of million an a borrowing be the contraction stronger our make us we and second we like strategic which of have equivalents sheet, as cash $XXX.X in available recent weather and of benefit million liquidity, investments Sales $XXX.X will the facility. under $X.X quarter cash Consequently, unrestricted industry's ABL with balance ended and consisting the We to

thinking to of XXXX Let we our turn are previous me with second this my the compares about now comments how how expectations. half and

First, shrinking to federal raising rate X.XX% the by over conditions achieve and has inflation financial to the its X% its funds balance Federal inflation Reserve continue bring X.X% time. July tightening to continued in objective sheet to control under rate

second X.XX million X% interest the over prior quarter our of the X.XX% peak These slipping policy led ongoing rates to June March mortgage units back July, units decisions and and X.XX XXXX in million February in from when recent home units X.XX to to reported fiscal monetary million which to existing in in led in sales first rising quarter. we

these over are long that impact monetary of to As and likelihood we now five the next policy X% fall actions likely the about think variable lag and the rates X% months. to ongoing mortgage less

now sales and around million quarter. assumption This XXXX exit level X.X rate million in units previous record remain X.X to units XXXX our X.X unit the X.X annualized, discussed million we expect near as to of below existing to We prudently home lows. first exit million is

single-family from in of makes price compared challenges. has previous housing Second, XX.X% NAR, XX.X% According with home the in is from remain income to June mortgage payment $XXX,XXX XXXX, in XXXX. price rates, And monthly affordability XX% appreciation years, which home they while moderated up rising was of elevated coupled the XXXX. $XXX,XXX with existing median now

prudently consideration, to our ongoing and and lower our sales these reflect fiscal Taking recent these term intermediate earnings headwinds. XXXX guidance headwinds into trends revised sales we

secular home and long-term XXX in as that as the challenges, our some potential trends ever. opportunity macroeconomic in the While remain U.S. store spending and relevant growth believe share the improvement environment present does market near-term we underpin

the that sale expand home the moat drive downturn and The terms. to investments factors XX% this supporting position share and of making gains homes home a to market remain home sale cycle believe historically aging We low and will over we in homes are long-term our committed better where housing during equity, further an old. well-established ourselves competitive improvement of inventory include existing XX-plus spending for new significant years stock, existing

homebuying millennials positioned this well years, more on their prime enter are as market. to growing Furthermore, we capitalize

XXXX will provide more updated pertaining Now to our fiscal outlook. I year some detail full

our billion compared to X.X% our to Net $X.XXX prior sales with guidance of sales $X.XXX of of $X.XXX compared with approximately $X.XXX decline store billion. to billion X% of down guidance billion approximately to prior flat. Comparable X% to

to the We expect of year. be QX lowest comp the

reminder, XXXX. are lapping transactions XX.X% a As in a QX versus in in of decline transactions decline we X.X% of QX XXXX in

The to one year our the $X.XX. to change $X.XX approximately point and share approximately two for each per from flow-through $X.XX percentage for full the share earnings for year. $X.XX $X.XX remaining of comp point compared of of per comp earnings quarters is impact a in $X.XX approximately prior guidance Diluted the with

We earnings year. be million. expect EBITDA with million compared $XXX $XXX million to our of of to of prior QX approximately to million $XXX Adjusted the guidance $XXX lowest

amortization with approximately with compared of approximately expense guidance. $XX our million. million, approximately prior and compared $XXX our interest prior shares guidance compared diluted $XXX our million with were million million, unchanged prior and $XX to $XX of XX% from of Depreciation of expense guidance guidance tax XX% average outstanding million prior weighted our rate to Net of $XX of approximately $XXX

capital to $XXX opened prior new stores, our to XX of $XXX $XXX our million prior of format compared of million expenditures with approximately million stores guidance XX We million. warehouse guidance to $XXX XX from

to pass remarks. Tom the Let for me back call some now closing

Tom Taylor

for among We our and are by grow make market marked market but accelerate our XXXX to in to differentiated Thanks, industry, industry to our execute and improvement have in to to everyone we the sales in believe our strategies to continue contraction strategic Bryan. continue Pros. share the of enable share. beyond, talent proven, in investments we challenging right us business believe ability growth year model times home segment These a particularly a will the our

in larger could to particularly contracting scale pricing, difficult sales direct period sourcing and compared a model. inventory for when marketing We to business our expect XXXX be manage independents

we deliver to share growth long-term day. for dedication to power we We to our like when earnings believe algorithm growth. customers managing associates intact. would believe serving remains our work are I every earnings to We market accelerate thank want our to partners industry our and Operator, and all business and significant of their vendor the questions. take hard now returns

Operator

UBS. Please [Operator Instructions] line come questions. of proceed first with Our with your from the questions Michael Lasser

Michael Lasser

Good few renovation been ask taking lot evening. which the most for why Decor And reason stores? Thanks last & is over-earning trends because that's to the about mature because or the flowing like my there's What the of might the question. debate consumers. are at a for the I a your have to whole money degree things been excessive house Floor years

realistic most key the is your So is stores. level mature of sales what productivity for

Trevor Lang

Michael, is I'll and Trevor. well. this weigh as take at in a Bryan that, crack may

mature how maybe know basis there. think that. during period, something our to there's I to mean the we XXX stores are comp I that as COVID over earned don't points our was their that from that I they home And homes working know below in much reported through But and what we back because obviously, that invested specifically were they we number were stuck home. at they went people know travel, couldn't then, total and is. can

in sure had to 'XX I'm 'XX half that probably was there's much part 'XX? when exactly So first our but you we and the of can truth strong how tell in that, results some the we of not of --

Tom Taylor

the of just comp Yes. kind about in. talk I'll bit well. little the as stores and Michael, a a I'll then bit little unbundle mature jump -- I'll

QX, will in low is they you QX. XX.X%. Trevor that in improve the down weakest were QX, the end X% half it, in the down So we down X.X%. down end QX, we're back from high X.X% said remember, What you That if we stacking X.X%. the the in they imply transactions. is call on believe if our now. the in were about follow QX we're back would And The you half on X.X% In were is QX story, down around X.X% think against reason is that if

The is stores over that other in XX were we XX XX% reason last year. opened QX also really of or

So, base comp single then in embedded as to mature start to on those to stores. well. back guide all in this to of the high are low digit double-digit enter point, is And declines QX going pay into Trevor's for

So that's embedded numbers within that you. kind we the gave of

So, our new we still guided Trevor's positive stores. point, store lower a comping what they're stores are our classes are than bit to little new so to -- our mature

Michael Lasser

do of off So, a to pushing are a simply heading Bryan, is per of average going settles, an acknowledgment they're them dust on Or is more take XXXX, some time to when sustainable this from overearning recovery? were just for -- to and stores going that the guidance what stores level. our your going be think the it's time as the mature to into then change you your store And to doing the sales you think about XXXX. find

Bryan Langley

a they've of would earn back down goals. in off, don't wouldn't we reason. to believe year, there's don't reason negative they no this where but Obviously, more overachieved that It's their any long-term to Yes. We they come think comp push We were. say. they're

Tom Taylor

share during staying this some market pushout level. a existing -- take to get at It this better. But try as we've challenge. to just long home And puts As to to got gives when things this time. is sales continue would are us

Operator

Zaccone Steven proceed of with your Citi. line the Please from come questions with questions. next Our

Steven Zaccone

then down the to market with market the down for then X%. to do think How weaker calling expect think the expected change in DIY the size ask biggest mid-singles in do growth and project, magnitude? by maybe the the is your guidance really rate overall categories what wanted about is I performing. coming you of And across guidance you Pro you when versus than even and about product

Tom Taylor

second first the Tom. can then and take is take the Trevor, you part. This part, I'll

still I stores, slower negative than open would are. market say at we we have as but mean pace I we is growing. comp So, growing We're growing. still we're the environment, a a

in X%. -- somewhere quarter, I were up our think the year-to-date, So, we're we around And X%. up

just So, there we that that growing. is traded, growth are with significant. when you people we're And at their look -- publicly compete

the lumber Shop And negative X%. was quarter Tile negative reported were down Mohawk was X.X% a reported period. XX. first North in America today. the There first

So we're growing.

market believe market share a So, condition the are. than taking we much we're is absolutely at good we and pretty in worse clip,

Trevor Lang

Pro rest XX measure our X that's DIY, commercial had, sales understand part as continues consumer, relative talked least And on to The the it, the to last years. control. That's retail ability the closely. business the struggling. part that's incredibly the our we X.X both And to Tom million business. you've the the to of million side to existing that account the do And of call well business for the small, do if that's mentioned, home turnover our much of well, the our I about side. and but commercial question, managers the We regional on continues second business Spartan

back this back And now is gotten are are rates You're it rates mortgage and -- hasn't better. any months now $X Interest X%. above million, cycle it. XX at into our

we feel the medium- the cycle. good long-term and cycle. our it's We And time just, just need as on outlooks get about as ever of just the past a compression so housing -- to

Steven Zaccone

next about Okay. competitive the The into about follow-up into of was price comments Great. your you're competitive had dynamics and feel the on in see now do I your And you year do savings, half get right gaps? dynamic we the back value given as you the and just year? that how the changing seeing market

Tom Taylor

feel said, more I But feel our competition. model And daily and in for for basis, going feels ever get think the sell while. Trevor as look month home I to I consecutive that. to XXnd This category basis. like competing we this them Tom. good think our forward, so as about has I is tough as people marketplace. price -- it's take I on we been negative of do a a we're market about challenging. is get We gaps to our a I'll versus worse, good a going This the it's existing a as mean, weekly on sales. how monitor those

to we're going continue that. so And monitor -- to

our this every We're of looking to new moat. value for protect type getting to customers going continue in environment. day know that we're are We

So we they feel good make about continue stay and good. our that price gaps to sure we'll

Operator

line your questions Please come questions. Steven proceed with Forbes of the next Guggenheim. with Our from

Steven Forbes

I updated wanted plan. on to focus capital spending the

I reduction store give in guess, were and/or you're to I the the terms wanted revision? the year on maybe So, out. the the capital And solely think spending comfortable us as about if curious tied level three of just that cash how first, you planning sort you're a pulled is what guidance flow I'm of implications stores of can pipeline to through confirm we that preview XXXX the thinking free for for of

Trevor Lang

start Trevor I'll will then Tom jump Steven, in. and and

So, year. spin land into very in really fewer more pushing the of the stores, question, and 'XX. actually then that just first reduction They're still kind tied is of a next purchases the little we the original contemplated bit three on. spending guide on to for had we're Those

we own XX% still to future tied 'XX of it's or spending land that So, given just more have. to and else. really class that looking class. purchase to of cut probably anything we're X% any that we've not And It's for the

had a year. kind the it's than the of at we bit So, just predicted less little of beginning

Tom Taylor

That's right. of question. I'll part the take the second

be of know said best difficult. we're cycle. but XXX-store last this is we ability, share, running We're I couple will we our to calls, market script, of the Things our algorithm. that know the our trying in business gain nothing's changed the As a we said through and in

XX least we to So plan stores at year. open next

XX at here that we year. open world stores how today, next to sit we that's plan we see the least As is

We pipeline is that into our in good the -- class next we've Northeast stores quarter. more We as up in in got we're a Brooklyn 'XX we may store of that to But update get stores terrific. open got our the markets. going

pipeline continue about path. excited going we're to down that So that are

Steven Forbes

Bryan. follow-up And maybe just then quick a for

down new operating back that of can think As comparable experienced expense weight the to experienced, deleverage, versus we sort revenues help you year-to-date, selling of growth? break you've into store deleverage store a

Trevor Lang

be the to in majority mature the of stores. Yes, going Yes. is it

think we credit fees. seeing what the when transaction higher wage rate so said prepared it, remarks, are And card you about increases, processing in I

And combat from like-for-like store they are have. that of on We've almost year. the inflation, was layering where so new the in the that last it is able to cost been still way equal kind stores a same but

the So is all to just almost the due deleverage sales. decrease in

So discretionary of we're hold kind costs because by at and store been flexing hours it's to We've all with those flat coming in negatively comping inflation spend. cutting even able our stores.

Operator

of with Gordon Please Our the next questions. with Grom proceed your questions come Chuck from line Haskett.

Charles Grom

recent And that's rates. Pros current the on the what next, you're on in it, over impact My months? question hearing call nine any and if for six is to having uptick the from projects plans

Trevor Lang

a bigger to They decent have the someone they and Pros what have lot We a We're backlogs, but still of right? of to may decent million over a has and hundreds is million, when pros backlogs multiple home, United when bedrooms lot done, several tell X States. slowed And bit. going us. there's over and X.X in they talked last invested saw across kitchens. homes, bathrooms And months. you're hundreds have sell it are the they projects a talking being that is -- There's turning little

Now home seen doing they is projects last or just of as is are $X.X smaller at doing floor, to much do along a the that years. lowest existing People kitchen. which million, whole bathroom just again a bumping one maybe in opposed we've a sales XX

too. come projects has also pretty relative our what And the to transactions their biggest changed we so the year, probably are started they've when for us we thought. close of that's said size That's to thing the down

we ticket square has the size of is think I jobs and of come what have going was some the know don't to close we footage But down, thought. pretty The that would happen. that to to thought

changes jobs over. that's So the just houses smaller are are a less people lot as turning probably doing biggest

Charles Grom

Okay. then just productivity. my question is Great. second new store And on

stores. You opened X

there I than store last of was opened were -- up think calculated you that you each it's said one I three day. of much is NSP XX%. think month within And the lower been the But on around the a month quarter.

going Just drive that is -- so on lower? there that there would anything

Trevor Lang

we When 'XX were in 'XX, incredible, the early 'XX class things million in think portfolio million number those do of first of anywhere think stores and year. sales the as at to about our around look we We and new of build our metrics. doing disclosed sort The in $XX.X from is in million $XX.X $XX.X always The that you class that 'XX. we million sales. stores should million, 'XX, way And XX-K. in I more $XX.X $XX of probably around is

seen because the down people less market. you've as sales just in come so same-store our there's And

come store new our down. seen You've productivity sales

under that can that up do kind still make more as X. they're going full of XXs, -- million do making the So so and think they're go a they maybe that were you're invested will. than of in over EBITDA $X is in this it just recovers, a a or stores less, bit million those productive those under on stores, but to stores -- capital. think to I And they're probably you $X.X well million still million all going -- really our $X we're now through maybe just economy to pull current above cost that $X making year less million, return give $X to environment, number in or to are going over in high very mid- I to back good And so little the over so going just capital us million, or and

Bryan Langley

of this a more mature. It as gives Bryan. they is curve maturation And us well

Trevor Lang

ultimate an to same. get the they're get to your same point. because Yes, Ultimately the to

Operator

with Please Morgan your of Stanley. the line Our proceed Gutman questions from with questions. next Simeon come

Simeon Gutman

little a about benefit think to a to headwind? margins. the ask year. there's back flip bit it of gross I mentioned and still the first want think benefiting, the half Does through of They're you a of part I I you I but early is flip some question I does price if guess, curious talk it, there into But over. price? about selective, it curious wraps what taking how mentioned were it's know to with 'XX. down. happens it And

Tom Taylor

XXXX. talk Yes, saw been back with us who I margin to said 'XX. about as into do price We're our up the I price ability margin, our sequentially it think protect very the margin value script, and have is in and to continuing taking we've to our like along that I -- rates. then and ability that pass professional it we customers -- our to improve been pleased early goes improve believe to some I've do just year-over-year. And able to continue to our

if design a watching measuring and of elasticity we're continuing a down getting own think benefit. price and -- job do our we chain It's are watch I better out. now, have but between getting seen unit taken going and initiatives initiatives it. inconclusive where costs selling best we're watching We're supply products we're But to and our great

better. Our merchants buying

I exceed our historical have gross margin think the ability to we rates.

yet about to How to We'll we'll get think quick determined. I have improvement. that talk comes, that be 'XX as is closer it, but we do

Simeon Gutman

negative spending it, that it, it's less. would to drive create this lock then to mentioned not in -- support I'm debate actually because about And wealth a another consumer 'XX. little stay hesitant effect Yes. continue that but necessarily in a just bit housing Trevor in industry market but industry, that and was it's not more talk about There avoid comps. the the the it's the homeowners or

say, But to think be some grow how it longer effect, I again, you or enough but forecasting. don't or period. could this sales a know how do let's it's early is about for existing 'XX, there it like, grow the home which are industry transition wealth -- business in this Like looks you do

Tom Taylor

year, I just at answer. who's been -- I'll look take even to -- answer the we I running I I that's sales We're negative stab. would going mean if think need that have difficult range. home as in XX% a one. other I mean looking each kind say existing of to into next

if better. won't So then as as we're there to the we at are us. that negative quarter, we if X.X, up. XX%. they could like lapping we better we -- start stay get not benefits we think if into They're the this next existing they're as year-over-year, or to year, than -- And we flat exit think fourth home were they we going go think into get year, And be slightly X.X, get sales that

I they think a be pretty -- demand And business year, I take next will there's this Their to you become more of in with people consumers may they balance sheets little look slant pent-up Now and slowdown the more on to think get and -- amount as going also our higher some good. projects. are to inpatient end.

know on do I'm are bathroom. -- redo to that what, to to enough, you goes that we and So, hopefully, redo long that as think going time waited say, kitchen. that people going I've will I'm going

between think goes So, XX% slight, I I And homes sales will probably then people because low. they're to maybe be think low, good. is time going more pretty existing their home do of think but year-over-year the on value on, not I as take

Bryan Langley

a market lot Bryan. mean if which more Look, more this to the to share. duration as going it's us lasts could also allow alluding you're gain I independent does, put if longer pressure even is it competitors, to, on our

to through way it. one just think So,

Operator

Fargo. of questions. the your Fadem Our next question Zach from Please with line Wells come proceed with

Zach Fadem

low change? there dynamics modeling still prices to who've believe could I maybe between and years? correlation over your folks that around Or to could historical that in the considering the follow I then about a and to business right way And think held how has sales the home that all home you up question. changed existing bit want rates the the rate historical that and the relationship business? about any last actually is and And reason correlation just mean, on up current locked talk your or mortgage is

Trevor Lang

I our do the correlates that macroeconomic that's factor think been to highest business.

home decelerated year back for business Obviously, look sales in the a at last per actually XX saw of were – as last late slowdown month interest home our business when you've the we 'XX time. and said They Existing and July. lot. turn XX% existing XX% months. for negative you for first fell some. or slowed up our when starting seen happen, kind and thing go that 'XX went You sales and 'XX 'XX, same rates And to

think I that’s right. yeah, So

XX I are way Tom tweak years. over below like though, sales, million think a to feel going mentioned as we existing doesn't home last four

only that’s happened think I once.

view. So, model we’ll And just continue into huge can When grow we turn doing negative. make from then competition we’re our to look is need and to think quickly at there, them we forward. the strides we versus our I what

we our think is our as I turnover good people, about feel low.

Our customer service scores are high.

Our fantastic. innovation the assortment and is

So, answer. that’s my best

Bryan Langley

the are happened & in say don’t I Yeah, to that anything Existing year-over-year Décor. good that’s that’s last positive sales there’s two Floor different. much home that’s change. year wouldn’t going thing I or for think a

Zach Fadem

I card. change the whole, private label credit terms well change then specifically I customers are seeing impact it. general your any if the a you color. for And from of the Pro. as Curious made tightening credit well you in the to appreciate your that Got think a on as card as as

Trevor Lang

they're than their a in and vendor with make Early We did rate a company us, about us. that we're feel with it. it about and card provider good label we And the is partner they're the United lot change we like of private We credit States approval in They slightly perceptive. a previous good it. aligned partner. with bigger optimistic more better Very a in went that felt private looks in May. largest do reads, big was a

Zach Fadem

Got it. Appreciate, thanks guys.

Trevor Lang

Zach. Thanks

Operator

Seth of [Operator Instructions] Sigman proceed Barclays. your line Our the you. Thank with questions. from comes next question Please with

Seth Sigman

Okay. Great.

lot maybe mix. out we're the average through let's it to say, And increases, of impact all S a happening your larger bigger that like a that XXXX. and where trying seems average I slowdown versus was was but same guess ticket of And from figure up, is here that price piece of settles projects So SKU XX% the a ticket. portion is

you a that normalizes. And hoping ticket little in us break to maybe average square where that How increase from do project? think that can for upside So down much came I per bit about you then was how footage more.

Does How go does based it you -- So that? XXXX to EHS? on go back about levels? do lower it think

Trevor Lang

highest years. our ticket then And going has for to ticket it's the I future think in themselves be bounce I year. round a the and this rate grow it out is last to to continue our at because that hopefully like will going our it's grow e-commerce faster think business XX where -- will

us, higher will Pro design business our Our is higher. as focus is homeowner grow ticket is for that ticket to continue hopeful big our we're a than Design

up points. basis Tom mentioned, that's XXX

just this we're think to is. level what out see of I year going kind So, and

sales, stores, commercial RAM of are Our are higher all get sales. the tickets. really big which most those -- those tendered Those through

So, years, my the those this on ticket in markets we've expectation is growth. worst once we're will XX seen we housing the drive get initiatives through last one arguably of strategic focused that

final merchants not invest, a versus as our continue very And pricing still mention take and we're we're better thing there, versus with doing And centers and our our independents. less home to pricing the our goes lot. I'll share but at generally to on do are business square our best against better and incredible also competition high. why is up footage, equation better because pricing our our that great is is to they're differential is assortment much value that's market the a part the job. continues our continuing competing And of focus speaking, you And competing best. People when look

Tom Taylor

a will they're rooms. people same in rooms do at when call, -- in a today, would people the -- once one in with of And the go more earlier I into say, they the start all mentioned do staying sales house. existing and their a the home move doing they is thing then time. get positive, house, back When And house, last along we're more in then room people those benefits questions, to doing

when thing. average gets that of into the ticket, the back a blend So, good that's

Operator

comes Our with of line the Please your questions. question from with Jonathan Jefferies. Matuszewski proceed next

Jonathan Matuszewski

question So, parts. two has my

late had So 'XX. it we strong what this margin for results quarter, exceeded gross been thinking

been the just for So gross you improvements as for such, and levels? haven't. planning that then how have from recent Tom, you XQ gross any you've where sequential maybe detail mentioned maybe you Can should where we And more XQ share rollbacks about margin, inconclusive. relatedly we margin? be Should pricing be thinking seen success,

Bryan Langley

to over I'll is it then Bryan. Tom. it this Jonathan, start pass and

So were QX XX.X%, for the gross XX.X%. at margin, QX, we

exceed slightly did We well. than the expectations internal to do So if better is back we going own at, obviously, be half not as XX.X%. our think that

the be a on for we So tells of year, XX.X% that exited. kind half should where which the year just back should than be better you basis, full slightly around full we

Tom Taylor

Yes.

I that think would It's They hard. say, I case. I -- that mentioned test are very inconclusive. and the then results just our -- inconclusive. remains earlier the are

own SKU broad, we've hard and a a come worked Some and thing SKU on appear appear shifted assortments one to takes are store price in another. a if to just it the ascertain It's made them some difference. because to within to our we have our have so they one customer -- well, from not to different

some we future. see do certain see lean we're more than more that and to that going to in benefits on We as difficulty. some think there's to others, So continue we benefit about that learning and departments apply price reductions the

Operator

of Our questions. Karen next question your proceed Credit Please Short comes with from with Suisse. line

Karen Short

Two research division questions.

relationship is can So deleverage deleverage, the is to it EBIT comp first as when actual relates about you think me on what that. we remind

EBIT. So like have you what comp down, X% if

Tom Taylor

Yes.

component million. is $XX year, this worth So every about

when that in flow through, it's So mid-XXs. you the usually

get So $X.XX in that's that where comp point we paid that we EPS flex, for full the for each year.

it change half, of half about is be about So every back would point for comp worth the $X.XX, that.

million in worth $XX it's half. back So the

Operator

with of Chris with line questions. proceed from the Please next Bottiglieri comes Paribas. Our question your BNP

Christopher Bottiglieri

now? home that market end So prevented. historically, from what self creating mean have that a matter. read Florida division. I why work the constraints Spartan of I court Spartan the construction some I that is been new into guess

Bryan Langley

the of I get the question question. didn't

about talking You're the new builder?

Tom Taylor

new or commercial me, talking Spartan. He's about the -- excuse within builder

Trevor Lang

Yes.

-- in So

Tom Taylor

Sales it's So, Master, a no.

So.

Christopher Bottiglieri

into getting home was new channel Spartan not that the that's release Press accurate. construction

Tom Taylor

that's Yes, or release question recent we Sales with a -- they've going press a that did on sure if someone hire the to we help Master them -- was question. weren't a Spartan hired it

that. about Sorry

good really that Floor Decor really job on Spartan do through new a do think don't at & but homebuilders, hired on segment focused historically. yes, recently much new opportunities. a about did helping is that's that We on Spartan RAMs our we the So a press we've It person custom release a with construction our us has not side. construction

that So think a think who's helped horsepower to us business us. big and we us from differently Board a that business about wanted about there educate Homes help to opportunity. help Pulte in us We get it's We've got differently. some member

we with big a we is going the well, And a it's so sector new opportunities sales you look low, think good if at home as today, So that's think on what's inventory there. that's existing can home we opportunity. doing and provide

of part So more Thus, we a good. to in future. our it we someone business want hired make the really meaningful

Operator

line Our Wedbush with Seth comes the your next of Please questions. with Basham from Securities. question proceed

Seth Basham

invest. up still just your by value better of want but follow consumers, increased mix focus to a couple to a shift regarding comments I you're on seeing on

First of of accurate? service second Can all, is square are adding opening all, price you forward, to that merchandise more you point? away? And that you as move that

Tom Taylor

first value our stores, on have and that the is value with -- in feelings kind my is with product. better first start really them it important I'll their in because house, we compete value, when still we to still best job independence they're best about the to product elects buy to best about customer better of talk spread the we do when So and electing the significant. proposition and The a the the mainly on the that products the

in is So they're to when want to products we homes, think we we their and do for moat competitive and think going best those to be and around our looking in the when still better. someone job, their going -- going stores is better they're that products the think

paying that, are always We very important for significant. particularly in We to price that's that's we know the We point. flipper opening business. So know attention do.

we attention. So pay

say good Our I'd I say added always we've job we've consistent merchants to a done. opening updating do to price points. points. of it's our our much opening what pretty historically wouldn't price

Operator

Baird. proceed Our with line question with the comes questions. of your next Kleber from Please Justin

Justin Kleber

it Is relative it you transactions on transactions And taking ticket? kind how a to of driving question improvement just then comps Or related here of is curious in about I'm back? sequential XQ. part you've what's on trended quarter-to-date. to step that seen in XQ? comment in the the Did guys talk specifically, Pro that Can you deceleration

Trevor Lang

Justin, jump it, maybe I'll side. can part and in of take the on first Trevor pro the

the that to home It's thing seeing. transactions. minimal is the we're that step led all around down tied sales the kind existing So of to deceleration

June. to So May in million million, and January if you and Feb March started stepped $X.X to remember, back million then $X.X up $X were existing down decline home they million in in $X.X in in down $X.X sales million

around leading line four so. The to really more negative That's that transactions are average in actually ticket that with expectations. is our

Trevor Lang

on but decelerated well, Pro it's DIY or business. homeowner And side, as still outperforming it the has the the

Operator

proceed next Our Keith from of line the question Hughes comes questions. with your Truist Securities. Please with

Keith Hughes

this question. last Yeah, the is on building

is of at? and guidance add are And you the in ticket in kind So second the half, expecting? are we What numbers looking subtraction?

Bryan Langley

negative. half ticket actually in So be will back the

sequentially And year. so it's declining the of we as throughout been kind expected

really, Transactions that have but they're less And better, your point. worse. get inflect will you so crossover

of cross year. and the as half down over ticket So will they'll cut stay negative well, for but the into back

Operator

with from with final question. will proceed your line Our of Please Melich come Evercore. question the Greg

Greg Melich

middle. on how this, to much to an so over it's driven mix update years. up off and I between follow categories. you just is dropped love category get if really the already the me, in changed answered love I'd But tell on please the because there I'd mix, just

I'd I and doing, wood trade think that know to but said what up, what you you're your still to laminates versus it's gross love does seeing margins.

Trevor Lang

Yes.

the, the man-made products natural to outperform I'm continue products. what call the to see do going we So

tile business, wood. the vinyl force the, better the And of it, rigid tile, mostly to the on the share natural on continuing perform and call laminate So versus core than stone wood ceramic of side businesses the business, businesses. the stone side taking are are but look porcelain from tile

Same higher the the natural is the are Deco. the in manmade in is products. products all natural products. are the thing is the the but going is and for margin profile margin manmade products sorry, man-made for answer I'm categories ticket in the So than products, those on the regards. profile for better And almost the better lower, genre

Bryan Langley

Bryan. is This

the Before in guys bit end, want a I help jump little kind to of and the modeling. just you with call

to make in. way natural transition an find couldn't You it

Just selling store original and X% That's was expenses on was to I be year. XX.X% at operating X.X% sales if question the the that’s guide. to going going be closer to the X%. of around now selling guide know to be asked, original opening General and XX% expenses store for XX% the had feel to that that or administrative -- that's sales. will for of but like year. X.X% still the Pro maintaining We

as wanted you to guys to I so that modeling. of And just have kind help well just with as the

Tom Taylor

-- to a time, down other of feel everything market like ready year. the we for is we side So We appreciate same call. our everyone's quarter interest second taking in we're I question-and-answer can doing while the earnings appreciate and This that concludes that share the balance everything cycle. our for of profitability, our our portion everyone outlook and is the doing. at

So on the forward you we updating to call. look next

Operator

conclude does This you. Thank teleconference. today's

disconnect your for you enjoy rest this at evening. time. You may and Thank of the your lines participation,

Floor & Decor (FND) 3 Aug 232023 Q2 Earnings call transcript